CNBC Fed Survey, September 17, 2013

FED SURVEY
September 17, 2013

These survey results represent the opinions of 47 of the nations top money managers, investment strategists, and professional economists. They responded to CNBCs invitation to participate in our online survey. Their responses were collected on September 12-13, 2013. Participants were not required to answer every question. Results are also shown for identical questions in earlier surveys. This is not intended to be a scientific poll and its results should not be extrapolated beyond those who did accept our invitation.
1. For all of 2013 and for all of 2014 (and only in 2014), what is the total amount of additional asset purchases the Federal Reserve will have made?
2013
$1,200
2014
$1,000
$858.8
$800
$917.0
$936.6
$883.6
$921.9
$941.9
$948.5
$600 Billions $400
$370.6
$200
$367.1
$373.5
$374.8
$381.9
$0
1/29/2013 3/19/2013 4/30/2013 6/18/2013 7/30/2013 9/6/2013 9/17/2013
CNBC Fed Survey September 17, 2013

Page 1 of 36
FED SURVEY
September 17, 2013 3. In what month do you expect the Fed to begin tapering its purchases?
June 18
60%
July 30
Sept 6
Sept 17
Averages
50%
Jan 29: Dec 2013 March 19: Jan 2014
40%
April 30: Feb 2014 June 18: Dec 2013
30%
July 30: November 2013 Sep 6: November 2013
20%
Sept 17: November 2013 48% selected September 2013 and 76% said tapering would begin in September or October 2013
10%
0%

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FED SURVEY
September 17, 2013
4. By how much do you believe the Fed will reduce its asset purchases in that first month?
$25
$22.1
$20
$19.2
$15
$14.5 $12.6
On average, respondents believe the Fed will maintain its new level of asset purchases for 3.63 months.
Billions $10
$5 $0 July 5 July 30
Sept 6
Sept 17

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FED SURVEY
September 17, 2013 6. What mix of Treasuries vs. mortgage-backed securities do you expect in the Federal Reserve's taper?
MBS 28%
Treasuries 72%

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FED SURVEY
September 17, 2013 7. When do you expect the Federal Reserve will completely stop purchasing assets?
June 18
30%
July 30
Sept 6
Sept 17
Averages
25%
Jan 29: Nov 2013 Mar 19: May 2014 Apr 30: July 2014
20%
Jun 18: July 2014
July 30: August 2014

15%
Sept 6: August 2014 Sept 17: August 2014
10%
5%
0%

Page 5 of 36
FED SURVEY
September 17, 2013 8. Based on your expectations for tapering, what percentage of the ultimate impact on each market is already discounted in the overall prices of that market?
July 30
90%
Sept 6
Sept 17
81% 81%
80%
82% 81%
73%
70%
70%
66% 58%
68%
60%
50%
40%
30%
20%
10%
0%
Treasuries
Equities
Mortgages

Page 6 of 36
FED SURVEY
September 17, 2013 9. Do you believe the U.S. SHOULD/WILL launch a military attack on Syria?
Should
80.0%
Will
70.0%
65%
60.0%
67%
50.0%
40.0%
30.0%
23%
20.0%
19% 16% 9%
10.0%
0.0% Yes No Don't know/unsure

Page 7 of 36
FED SURVEY
September 17, 2013 10. What would be the short-term impact on equities if the U.S. does launch a military attack on Syria?
40%
35%
30%
Average: -4.8%
25%
20%
15%
10%
5%
0% -20%
-16%
-12%
-8%
-4%
0%
+4%
+8%
+12% +16% +20%

Page 8 of 36
FED SURVEY
September 17, 2013 11. Who will President Obama nominate as the next Fed chairman? Sept 12-13 represents responses before Summers withdrew from
consideration. Sept 16 responses are from a separate survey after Summers withdrew.
July 30
0% Ben BERNANKE Martin FELDSTEIN Roger FERGUSON Glenn HUBBARD Don KOHN Alan KRUEGER 0% 0% 0% 0% 2% 2% 2% 0%
Sept 12-13 (before)

20% 40%
Sept 16 (after)
60% 80% 100%
2% 6% 0% 0% 2% 0% 2% 20% 58%
Christine ROMER
Larry SUMMERS John TAYLOR Paul VOLCKER Janet YELLEN Don't know/unsure
30% 4% 7% 2%
72%
88%

Page 9 of 36
FED SURVEY
September 17, 2013 Who should President Obama nominate as the next Fed chairman?
July 30
0% Ben BERNANKE Martin FELDSTEIN Roger FERGUSON Glenn HUBBARD Don KOHN Alan KRUEGER Christine ROMER Larry SUMMERS John TAYLOR Paul VOLCKER Janet YELLEN Don't know/unsure 10% 20%
Sept 17
30% 40% 50% 60%
2% 2% 2% 6% 5% 2% 2% 2% 0% 2% 0% 6%
10%
8%
12%
10% 16%
2% 44% 4%
56%
0%

Page 10 of 36
FED SURVEY
September 17, 2013 7. Compared to Ben Bernanke, the next Fed chairman will be:
July 30
60%
Sept 17
52%
50%
43%
40%
30%
30%
26%
20%
17% 14%
10%
7% 2% 2%
0% Much more dovish Somewhat No different more dovish Somewhat more hawkish
2%
4% 0%
Much more Don't hawkish know/unsure

Page 11 of 36
FED SURVEY
September 17, 2013 8. Please rate the following four candidates for the Fed chairmans job on the listed qualities. (On a scale of 1 to 5, where a higher number means a higher rating.)
Bernanke Kohn 2.00 Monetary policy expertise (4.52) Summers 2.50 3.00 Yellen 3.50
3.08
4.00
4.50
4.21
5.00
4.63 4.61
Ability to manage a financial crisis (4.30)

3.17
3.56 3.61 3.71 3.71 3.58 3.74 3.53 3.68 3.34 3.45 3.63 3.61 3.55 3.55 3.39 3.45
4.37
Good communication skills (4.22)
2.63
4.16
Respect from financial markets (4.18)
Concern about inflation (4.08)

3.05
Financial market expertise (4.04)
4.42 3.71 3.95 4.16 4.63
Respect from international financial leaders (3.41)
Concern about unemployment (3.39)

3.03
3.59 3.46 3.61
Good political skills (3.27)
2.76
3.24 3.89 3.67 3.51
Banking regulatory expertise (2.94)
3.16
Numbers in parentheses to the right of the qualities represent how essential they are to the job of Fed chairman on a scale of 1 (least) to 5 (most), as ranked in the July 30 survey.

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FED SURVEY
September 17, 2013

Sum of candidate ratings weighted by essentialness of each quality. 180
160
140
Banking regulatory expertise (2.94)
Good political skills (3.27)

120 Concern about unemployment (3.39) Respect from international financial leaders (3.41) Financial market expertise (4.04) Concern about inflation (4.08) Respect from financial markets (4.18)
100
80
60
Good communication skills (4.22) Ability to manage a financial crisis (4.30) Monetary policy expertise (4.52)
40
20
0 Summers Yellen Bernanke Kohn

Page 13 of 36
FED SURVEY
September 17, 2013 9. What grade would you give Fed Chairman Ben Bernanke?
Dec 22, 2010
0%
July 21, 2011

10% 20%
Jan 23, 2012

30% 40%
Sept 17, 2013

50% 60%
26% A 22% 23% 30%
42%
B 48% 48% 48% 22% C 19% 13% 18% 5% D 5% 9% 2% 5% F 3% 0% 2%
Average for Sept 17 survey:
B (3.00)
Don't know/unsure
4% 7% 0% Numerical average based on A=4, B=3, C=2, D=1, F=0

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FED SURVEY
September 17, 2013 Comments on this question:

Marshall Acuff, Cary Street Partners: (C) Over communicated. Robert Brusca, Fact and Opinion Economics: (B) Great for in-crisis management; lesser grade for afterward. John Donaldson, Haverford Trust Co.: (A) His knowledge of the Depression ultimately prevented another one. Stuart Hoffman, PNC: (A) The right chairman at the right time for the right monetary policy strategy. Hugh Johnson, Hugh Johnson Advisors: (A) Largely because of his understanding of financial and economic history, particularly his understanding of the 1930s, Bernanke has been fortunately an excellent chairman. The next chair needs to be equally familiar with financial market history to be effective. John Kattar, Ardent Asset Advisors: (B) Good handling of financial crisis, but ZIRP and QE went on too long. Barry Knapp, Barclays PLC: Crisis policies and creativity should create a very favorable legacy. The non-crisis QE period will be criticized by left-leaning intelligentsia and neo-classical economists alike. Subodh Kumar, Subodh Kumar & Associates: (C) Over entire term one must consider missing the buildup to the crisis and the controversial 2011/12 expansion of QE as well as the laudable initiation of QE response in first phase. Guy LeBas, Janney Montgomery Scott: (A) Although the long term implications of aggressive monetary expansion aren't clear, Bernanke has done an excellent job in preventing financial Armageddon. Donald Luskin, Trend Macrolytics: (B) Good man in a storm. In the aftermath, not so much. Ward McCarthy, Jefferies: (B) He, like Treasury, the White House, Congress and other regulators, was among those who failed to anticipate the crisis. His performance since the crisis has been extraordinary. CNBC Fed Survey September 17, 2013
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FED SURVEY
September 17, 2013
Larry McMillan, McMillan Analysis: (D) This will be his grade in retrospect when the full effect of his policies becomes known. Lynn Reaser, Point Loma Nazarene University: (B) Chairman Bernanke handled the financial crisis with great expertise. His grade on the Fed's exit strategy is still "incomplete." John Roberts, Hilliard Lyons: (B) Would probably offer a B+. John Ryding, RDQ Economics: (C) He gets an A for the handling of the crisis but a D otherwise. Hank Smith, Haverford Investments: (A) For all of the Bernanke critics: what was the alternative?? Stephen Stanley, Pierpont Securities: (B) High marks for navigating the crisis. Dismal performance since then. Diane Swonk, Mesirow Financial: (A) It was serendipity that an expert on financial crises got the job; he deserves credit for saving the credit markets from themselves.
.

Page 16 of 36
FED SURVEY
September 17, 2013 10. Since September 2012, market functioning in the government bond market has:
70%
65% 60%
60%
Stayed the same
same 50%
47%
46% 42%
40%
30%
29%
Worsened somewhat
25% 19%
Improved somewhat
27%
20%
15% 15%
10%
Worsened a lot
20%
17%
11%
2% 2%
April 30
12% 2%
June 18
8%
Improved a lot
4% 2%
July 30
2%
Sept 17
0% March 19

Page 17 of 36
FED SURVEY
September 17, 2013 Since September 2012, market liquidity in the government bond market has:
60%
52%
Stayed the same
50%
48%
41%
40%
40%
30%
29%
30% 28%
Improved somewhat
29%
21%
20%
17% 17% 15% 19%
20%
Worsened somewhat
20%
10%
Improved a lot
8% 5% 5% 6%
Worsened a lot
4%
4%
2%
4% 4%
Sept 17
0%
March 19
April 30
June 18
July 30

Page 18 of 36
FED SURVEY
September 17, 2013 11. Since September 2012, market functioning in the mortgagebacked security market market has:
45%
41%
40%
39%
Stayed the same
35%
31%
30%
32% 31% 31%
29%
25%
Improved somewhat
22%
20%
23%
21% 21%
20%
Worsened somewhat
20%
20%
18%
15%
10%
Worsened a lot
5%
4% 2%
4%
5% 5%
6% 5% 4%
July 30
5%
0% March 19
2%
April 30
Improved a lot
June 18
Sept 17

Page 19 of 36
FED SURVEY
September 17, 2013 Since September 2012, market liquidity in the mortgagebacked security market market has:
45%
40%
40%
Stayed the same
35%
34% 30%
30%
30% 28% 28%
25%
Improved somewhat
28% 25%
25%
20%
21% 19%
Worsened somewhat
22% 20% 18% 18%
15%
10%
Worsened a lot
8% 7% 7% 5% 2% 6%
Improved a lot
7% 7%
5%
4%
0% March 19 April 30 June 18 July 30 Sept 17

Page 20 of 36
FED SURVEY
September 17, 2013 12. Compared with the debate at the beginning of the year, the next round of discussions to raise the debt ceiling will be:
July 30
60%
Sept 17
50%
49% 44%
40%
35%
30%
27% 24% 19%
20%
10%
2%
0% More contentious About the same Less contentious
0%
Don't know/unsure

Page 21 of 36
FED SURVEY
September 17, 2013 What is the probability that the United States fails to raise the debt ceiling in the coming months and defaults on at least some of its payments?
July 30
60%
Sept 17
50%
40% Percentage of respondents
Averages July 30: 6.6% Sept 17: 8.4%
30%
20%
10%
0%
0%
10%
20%
30%
40% 50% 60% Default probability
70%
80%
90%
100%

Page 22 of 36
FED SURVEY
September 17, 2013 13. When it comes to the budget deficit, the United States:
Should urgently enact a plan that puts it on a path toward a sustainable budget deficit Has at least a couple of years before it must enact such a plan Does not need to enact a plan that puts it on a path toward a sustainable budget deficit Don't know/unsure
90%
80%
80%
70%
67%
60%
52%
50%
52% 44%
50%
40%
39% 40% 40% 41%
30%
25% 16% 12% 9% 4% 4% 8% 9%
20%
10%
0% January 29 March 19 April 30 June 18 July 30 Sept 17

Page 23 of 36
FED SURVEY
September 17, 2013 14. Where do you expect the S&P 500 stock index will be on ?
December 31, 2013
1,800
June 30, 2014
1751
1,750
1752 1709
1723 1691 1655
1,700
1685 1654
1,650
1612
1,600
1589 1547
1,550
1,500
1,450
1,400
Jan 29 2013
March 19
April 30
June 18
Survey Dates
July 30
Sept 6
Sept 30

Page 24 of 36
FED SURVEY
September 17, 2013 15. What do you expect the yield on the 10-year Treasury note will be on ?
December 31, 2013
4.0%
June 30, 2014
3.5%
3.33% 3.10% 3.00%
3.39% 3.02%
3.0%
2.80% 2.41% 2.10%
2.73%
2.5%
2.31%
2.35%
2.0%
1.5%
1.0%
0.5%
0.0%
Jan 29 2013 March 19 April 30 June 18 Survey Dates July 30 Sept 6 Sept 30

Page 25 of 36
FED SURVEY
September 17, 2013 16. What is your forecast for the year-over-year percentage change in real U.S. GDP for ?
2013
3.0%
2014
+2.7% 2.5% +2.6% +2.6%
+2.6% +2.6% +2.6% +2.6% +2.6% +2.5%
+2.3% +2.2% 2.0%
+2.1% +2.1% +2.1% +2.1% +1.9% +2.0% +1.9%
1.5%
1.0%
Survey Dates

Page 26 of 36
FED SURVEY
September 17, 2013 17. When do you think the FOMC will first increase the fed funds rate?
Increase fed funds rate (Average response)
Survey Date Dec 11, 2012 2013 Q2 Q3 Q4 2014 Q1 Q2 Q3 Q4 2015 Q1 Q2 Q3 Q4 2016 Q1 Q2 Q3 Q4

2017 or later
2015 Q1 2015 Q1 2015 Q1 2015 Q2 2015 Q2 2015 Q3 2015 Q2 2015 Q3
Jan 29, 2013
Mar 19, 2013
Apr 30, 2013
Jun 18, 2013
Jul 30, 2013
Sept 6, 2013
Sept 17, 2013

Page 27 of 36
FED SURVEY
September 17, 2013 Currently, Fed policy is not to raise interest rates until the unemployment rate is at least 6.5%. Will the Fed change that guidance?
July 30
70%
Sept 17
60%
60%
51%
50%
44%
40%
30%
30%
20%
10%
10% 4%
0% Yes No Don't know/unsure

Page 28 of 36
FED SURVEY
September 17, 2013 If the Fed does change its guidance, what will be the new threshold?
July 30
60%
Sept 17
50%
Averages for those answering with a number July 30: 6.23% Sept 17: 6.07%
52% 49% 43%
40%
32% 30%
20% 11% 10% 3% 2% 0% 5% 2% 0%
Thresholds

Page 29 of 36
FED SURVEY
September 17, 2013 24. Where do you expect the fed funds target rate will be on ?
Dec 31, 2013 June 30, 2014 Dec 31, 2014 Dec 31, 2015
1.2%
1.0%
0.97% 0.92%
0.8%
0.6%
0.4% 0.28% 0.27% 0.21% 0.17% 0.19% 0.19% 0.20% 0.21% 0.18% 0.16% 0.14%
0.33%
0.2%
0.16% 0.15%
0.13% 0.13%
0.0% Jul 31 Sep 12Dec 11Jan 29 Mar Apr 30 Jun 18 Jul 30 Sept 6 Sept 2013 19 17 Survey Dates

Page 30 of 36
FED SURVEY
September 17, 2013 25. In the next 12 months, what percent probability do you place on the U.S. entering recession? (0%=No chance of recession, 100%=Certainty of recession)
40%
35% 34.0% 30%
36.1%
28.5% 25.9% 25.5% 26.0% 20.6% 19.1%
25%
20%
20.3%
20.4% 17.6%
18.2%
16.9% 16.2%
15%
15.2%
10%
5%
0%
Survey Dates

Page 31 of 36
FED SURVEY
September 17, 2013 26. What is the single biggest threat facing the U.S. economic recovery?
April 30 0% European recession/financial crisis Tax/regulatory policies Slow job growth High gasoline prices Overall inflation Deflation Debt ceiling Too little budget deficit reduction Too much budget deficit reduction Rise in interest rates Other Don't know/unsure 0% 0% 4% 0% 2% 2% 4% 0% 0% 3% 2% 3% 2% 2% 2% 20% 20% 22% Jun 18 5% Jul 30 10% 8% Sept 17 15% 20% 15% 20% 31% 28% 30% 25% 30% 35%
4%
2% 2% 0% 9% 4% 10% 11% 13% 14% 13%
Other responses:

Toss up: tax and regulations vs. deflation Low capex Low wage growth and household deleveraging

Page 32 of 36
FED SURVEY
September 17, 2013 27. What is your primary area of interest?
Currencies 0%
Other 16%
Fixed Income 16%
Economics 50%
Equities 18%
Comments: Marshall Acuff, Cary Street Partners: Unless political leadership improves, valuations of U.S. equities are not likely to sustain any significant increase from current levels. Robert Brusca, Fact and Opinion Economics: Fiscal policy = 0. Monetary policy is disoriented. The economy is growing but sputtering. The president thinks he makes things better by giving speeches. U.S. foreign policy is now a tangled mess. There is nothing solid investors can be sure of (apart from death and even MORE taxes). You can taste the entropy and feel the concern for the future. It's a good thing we have discovered so much oil/energy at home now if we could only agree to develop it. Or maybe just have the president give a speech about it... Tony Crescenzi, PIMCO: There has been a gigantic switcheroo in positioning in the bond market, with non-commercial traders in
CNBC Fed Survey July 30, 2013
Page 33 of 36
FED SURVEY
September 17, 2013 eurodollar futures shifting by 1 million contracts from long to short since May to price in Fed rate hikes as early as next year. With rate hikes priced in, interest rate volatility should simmer down somewhat, save for further technical reverberations. John Donaldson, Haverford Trust Co.: If the bond market can absorb the Verizon deal and have good Treasury auctions this week, it can certainly handle a little tapering. Mike Dueker, Russell Investments: Fed decisions about the timing and pace of tapering will not have a great effect on the overall size of the balance sheet that the Fed carries into the second half of 2014 and 2015. Unfortunately the Fed has put itself in a box where every decision is supposed to be viewed as important. The important thing, which does not depend much on the shape of tapering, is that the Fed will carry a very accommodative balance sheet until the first rate hike, probably in 2015Q3. Stuart Hoffman, PNC: The "taper worm" will not cause the economy much indigestion. It will increase market function/signal in the Treasury and MBS markets. John Kattar, Ardent Asset Advisors: The Fed has done a very good job of preparing the markets for taper, and the markets (especially stocks) have discounted this well. It is likely that stocks in particular would react positively to a taper of $10 billion or less. Subodh Kumar, Subodh Kumar & Associates: Markets appear to be shifting to fundamentals as central bank dominance on long fixed income fades. Central banks and the Federal Reserve in particular need to explicitly acknowledge collateral damage from QE on crucial capital market health issues like impact on savers and on hot money flows to emerging economies as well as being less compliant on political procrastination on deficit reduction. Market volatility issues remain elevated. Quality favored as investment theme.
Page 34 of 36
FED SURVEY
September 17, 2013 William Larkin, Cabot Money Management: The risks in the bond market are elevated because many bond investors arent aware of the true potential dangers of the current monetary policy experiment. Guy LeBas, Janney Montgomery Scott: The taper is hands down the single most clearly telegraphed move in the history of monetary policy. We first started talking about it in the Jan. FOMC minutes, and there's been a slow progression ever since. We also know that the Fed wants to be buying $0 in bonds by mid-2014. Whether the reductions start in September of November doesn't matter. There's a starting point ($85 billion), and ending point ($0 billion), and a timeframe that's already been set. Ward McCarthy, Jefferies: It would be more logical for the FOMC to implement tapering later this year and coordinate the tapering with a change in rate guidance. The market has already done quite a bit of tightening for the Fed at a time when disinflation is still ongoing. Rob Morgan, Fulcrum Securities: Fed Chair Bernanke said that tapering will begin sometime this year if economic data holds up. Weekly initial jobless claims are near six-year lows and existing home sales are near three-year highs. What's not to like? Joel Naroff, Naroff Economic Advisors: Starting the tapering is not being based on economic growth, which is still not strong enough for the Fed to declare victory. Instead, concerns about market damage and inflation are driving the decision making, which makes determining the starting point and speed of the tapering difficult. James Paulsen, Wells Capital Management: Annual wage inflation is now 2.2%. In the next few months, if wage inflation rises much higher as the unemployment rate nears 7%, the discussion within and surrounding the Fed may change from a primary focus on
Page 35 of 36
FED SURVEY
September 17, 2013 the job market to an increasing focus about inflation risk. Remember, the 1970s proved inflation can rise from high unemployment rates and this fear would be heightened should wage inflation rise above 2.5 percent while the U.S. dollar was weak and commodity prices were rising. Lynn Reaser, Point Loma Nazarene University: Monetary policy is at a point of only bad choices. Tapering now could choke off economic growth through the housing, stock market, and emerging market economic channels. Failure to begin to scale back asset purchases will only delay the inevitable and give a brief period of respite without setting the economy on a fundamentally stronger track. John Roberts, Hilliard Lyons: Our major worry is whether rising rates, should they continue over the near term, derail the current meager level of growth. The answer is up in the air with the uncertainty of interest rate increases in the near term from the current higher plateau. However, should we see meaningful increases from here, we believe the likelihood of growth slowing is very high. Allen Sinai, Decision Economics: Finally, the U.S. economy is showing more signs of a normal business cycle expansion. Hank Smith, Haverford Investments: When is the Fed going to become more vocal about the need for better pro-growth fiscal policy? Better fiscal policy is the key for the Fed moving to a more neutral monetary policy. Diane Swonk, Mesirow Financial: Markets need to get used to the idea that QE3 is not QE infinity.

Page 36 of 36

CNBC Fed Survey, September 17, 2013

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FED SURVEY

September 17, 2013

$600 Billions $400